The 5/29/21 Weekend Report

The Dollar

The dollar formed a swing low on Wednesday.

The dollar closed above the 10 day MA and the declining trend line on Friday so will will label day 18 as the DCL. The dollar should go on to turn the 10 day MA high as it rallies out of its DCL. Currently, the dollar is in a daily downtrend. The dollar will remain in its daily downtrend unless it can close back above the upper daily cycle band.

Stocks

Stocks are on day 12 for the daily cycle and RSI 05 still has not embedded in overbought.

During the advancing phase of the intermediate cycle, RSI 05 tends to get embedded in overbought as evidenced in early April. But notice as stocks broke out to a new high in late April and early May those breakouts were followed by 2 quick bearish reversals in RSI. That could be an early warning that an emerging bearish RSI pattern is beginning to emerge. 

Now that stocks are rallying out of their DCL we need to keep a watch on RSI. If it begins to embed once again in overbought, that would indicate a resumption of the intermediate cycle advance. However, a quick bearish reversal would indicate an end to the intermediate cycle advance and the beginning of an intermediate cycle decline. We will use a close below the 4200 breakout level as a warning and a close below the 10 day MA to signal the daily cycle decline.  

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